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How to keep consumer lending healthy as younger members drift

Kate Randazzo

June 5, 2026

0 min read

Nontraditional credit pathways are the new competition

While credit unions continue to post solid lending results, a growing share of borrowing activity is occurring outside credit union channels. Younger consumers are actively using credit, but they are increasingly choosing nontraditional pathways to access it. As a result, institutions may need to look beyond funded loan volume to understand whether they are capturing future borrowers.

This article covers these key topics:

Consumer lending still looks strong on paper
Younger borrowers are active, but borrow differently
Relationships require time that automation can free up
Investigative questions around engaging with younger members

Consumer lending still looks strong on paper

Credit unions continue to report healthy lending performance across several core measures. According to recent NCUA data, federally insured credit unions have continued to grow loans, assets, and membership while maintaining relatively stable credit performance. For many institutions, these results reinforce confidence that consumer lending remains healthy and resilient.

Those numbers primarily measure activity that has already reached the institution. They do not show how many consumers considered borrowing but chose another provider. They do not reveal which financing decisions occurred before a member ever visited a credit union website. And they do not capture borrowing activity that happens through channels outside the traditional application process.

In other words, traditional lending metrics can only tell us what entered the funnel, not what bypassed it.

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Younger borrowers are active but borrowing differently

Research from TransUnion shows Gen Z consumers are becoming credit active earlier and at higher rates than previous generations at similar ages. At the same time, the Consumer Financial Protection Bureau has documented the rapid growth of Buy Now, Pay Later financing and other point-of-sale credit options. Taken together, these trends suggest that younger consumers are not avoiding borrowing, but are increasingly encountering credit in new places.

A consumer shopping online may be offered financing at checkout. A large purchase may come with installment-payment options embedded directly into the buying experience. In many cases, the financing decision is made before the consumer actively shops for a loan. This creates a challenge for credit unions.

Historically, lenders competed when a borrower decided they needed credit. Today, that decision often occurs within a retail, digital, or fintech environment where the credit union may never be considered.

Relationships still matter, but they require time

The growth of alternative lending channels does not necessarily mean younger consumers no longer value financial guidance. Many borrowers still seek trusted advice when making major financial decisions, comparing financing options, or evaluating the long-term impact of borrowing. That has long been one of the credit union movement's strengths.

As borrowing channels become more fragmented, that strength may become even more important. While adopting digital lending can be a draw for younger members, credit unions are unlikely to out-fintech every fintech or outspend every digital lender. What they can offer is a combination of trusted relationships, financial guidance, and personalized service that many alternative lenders cannot easily replicate.

Automating can help free up lenders

Many lenders continue to spend significant portions of their day gathering documents, tracking down information, managing workflows, and completing other administrative tasks. But every hour spent on manual processes is an hour not spent engaging members, answering questions, or identifying borrowing needs before those needs are met elsewhere.

Investing in the right technology can help free lenders from routine administrative work, allowing them to spend more time on business development and customer relationships.

For credit unions seeking to engage younger consumer lending borrowers, lending efficiency can create capacity for the conversations and guidance that strengthen member relationships.

Get curious about new generations of members

Current lending performance is supported in part by long-established member relationships. Many credit unions continue to benefit from strong member engagement, with members maintaining borrowing relationships for years or decades. These consumers are often more likely to return to familiar institutions when financing needs arise. If younger consumers increasingly encounter credit through alternative channels, credit unions may need to find ways to engage them earlier in the borrowing journey. This starts with asking a different set of questions:

Where are members borrowing when they do not come to us?
What percentage of borrowing decisions never enter our application funnel?
Are lenders spending enough time building relationships before borrowing needs arise?
How would we know if younger consumer lending borrowers were disengaging before loan volume begins to decline?

These questions may provide a more forward-looking view of lending performance than funded volume alone. Combining streamlined lending operations with the relationship-focused approach that has always differentiated credit unions may better equip credit unions to reach younger consumer lending borrowers before financing decisions are made elsewhere.

This blog was developed with the assistance of ChatGPT, an AI large language model. It was reviewed and revised by Abrigo's subject-matter expert for accuracy and additional insight.

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FAQ

Why should credit unions be concerned about borrowing activity outside their institution?

Borrowing activity that occurs outside the credit union may signal changing consumer preferences and decision-making habits. If members increasingly choose financing options offered through retailers, fintechs, or digital platforms, credit unions may have fewer opportunities to build lending relationships that can lead to future products and services.

Why are younger consumers using alternative credit options?

Younger consumers increasingly encounter credit at the point of sale through Buy Now, Pay Later programs, embedded financing offers, and digital lending platforms. These options are often integrated directly into the purchasing experience, making them convenient and immediately accessible. While traditional loans remain important, many younger borrowers are exploring multiple credit channels depending on the purchase and situation.

Does strong loan growth mean a credit union is successfully reaching younger borrowers?

Not necessarily. Loan growth is an important measure of performance, but it only captures activity that reaches the institution's lending funnel. A credit union can experience healthy loan growth while still missing opportunities to engage younger consumers who are obtaining credit through alternative providers before ever considering a traditional loan application.

How can credit unions strengthen relationships with younger borrowers?

Building relationships with younger borrowers often starts before a loan application is submitted. Financial education, personalized guidance, proactive outreach, and convenient lending experiences can help credit unions remain relevant throughout the borrowing journey. Establishing trust early may increase the likelihood that consumers consider the credit union when future financing needs arise.

What role does lending automation play in member engagement?

Lending automation can help reduce the time lenders spend on administrative and manual tasks. By streamlining workflows, gathering information more efficiently, and accelerating decision-making, credit unions can create more capacity for lenders to focus on member conversations, financial guidance, and relationship-building activities that differentiate the institution from many alternative lending providers.

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